Leave Encashment Limit Increased: Big gift to those doing private jobs, leave encashment up to 25 lakhs will be tax-free

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Budget 2023 : Finance Minister Nirmala Sitharaman has given a big relief to the taxpayers. He has increased the limit of Leave Encashment from Rs 3 lakh to Rs 25 lakh. He announced this in the budget speech on 1 February.

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He said that last time in the year 2002, the limit of tax exemption on leave encashment was fixed at Rs 3 lakh. This was for non-government salaried employees. Then the highest basic pay for a government employee was Rs 30,000 per month. He said that in view of the increase in salary, I propose to increase this limit to Rs 25 lakh.

Employees get some paid leave every year

Salaried Person gets some paid leave every year. But, it is not necessary that the employee makes full use of this leave available every year. He gets the facility to carry forward the unused leave. Due to this, gradually a large number of such leaves get accumulated with him. He uses it at the time of retirement or leaving the job. The company pays him money in lieu of unused paid leave. This concept is called leave encashment.

Now there was a limit of Rs 3 lakh

Chetan Chandak, director of tax consultancy firm TaxBirbal, said, “Encashment of paid leave up to 10 months’ average salary of employees other than central and state government employees is exempt from income tax. At present, the maximum amount for exemption is Rs 3 lakh. It is Rs. Union Budget 2023 proposes to increase this limit to Rs 25 lakh.

Benefit of standard deduction to pensioners

The Finance Minister has introduced standard deduction for family pensioners. He has said in the budget speech that pensioners whose annual income is Rs 15.5 lakh or more will get a benefit of Rs 52,500.

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